Succession planning involves the process of identifying and developing new leaders who can replace existing leaders when they leave, retire or sadly pass away.
Within a business, succession planning necessitates developing people with the potential to fill key leadership positions within the organisation.
People talk about “grooming” an individual to take over a business or a particular role in the future.
At HNH Group, we consider succession planning to be about continual ongoing preparation so that your business is ready for all eventualities.
It’s the idea that if someone from any aspect of the business leaves, that there’s someone ready to fill the gap, ideally from within the business.
It’s important to strike a balance between the needs of the business and the development of the employee so that progression opportunities are available and there’s a healthy environment in which this can take place.
Developing others within your team enables you to take the next step up the career ladder without leaving a gap.
There can also be a plan to bring someone in from outside of the business.
The key point being that the business never relies solely on one particular person or plan, but that it has at the very least another couple of options in play should unforeseen circumstances arise.
If an owner all of a sudden wants to exit the business because of a change in personal circumstances, or an owner passes away, or if the next person in line has been given the opportunity to develop and learn what’s required to fill the gap, your business can then handle change as seamlessly as possible.
Our view of succession planning provides a two-pronged approach:
Looking at the risk factors of a business where succession is not managed effectively and how it can impact the value of the business in financial terms.
This can be gauged by taking a good look at your business and asking yourself:
Is it saleable?
Can it function without a particular key player or Managing Director?
A well-thought out succession plan can have a significant impact on the value and the structure of a sale.
Ultimately, all businesses are saleable, but if there is a dependence upon any one person, it’s likely a purchaser will seek to protect their position by locking in that particular individual for a period of time after the sale and linking their final payment to certain business targets.
You have to go through succession at some point, it’s simply a question of whether you do it on your terms (pre-sale), or on the purchaser’s terms (post-sale).
What does succession planning mean for the people within the business?
Is there room to climb the ladder without becoming a dispensable member of staff while still feeling valued for your individual contribution to the business?
Succession planning in this manner results in the sharing of knowledge vital to the success of the business which, in turn, encourages professional and personal development.
It’s not simply a transfer of information but rather a mentorship.
The great mentors and influencers on your career can have a positive impact outside of your professional career too.
We look forward to diving deeper into a range of areas integral to succession planning over the coming weeks and months and help you to consider your own current position as a business.
Below is a list of the various topics we are currently planning to cover in this blog series:
• What options are on the table?
• How we facilitate succession planning at HNH
• 10 common succession planning mistakes
• Five opportunities succession planning presents
• When should you begin succession planning?
• The flexibility required within your succession plan
• What intellectual property is vital for your business to retain?
• How to develop your successor
• Equity compensation advice to retain key talent
• Founder Syndrome: Facilitating the process of letting go